Director Of Income Tax vs Modern Charitable Foundation
2011 Latest Caselaw 2646 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                            ITA No.1501 of 2010

%                                  Decision Delivered On: May 18, 2011


       DIRECTOR OF INCOME TAX                              . . . APPELLANT

                          through :           Ms. P.L. Bansal, Sr. Advocate
                                              with Mr. Deepak Anand,
                                              Advocate.

                                 VERSUS


       MODERN CHARITABLE FOUNDATION                      . . .RESPONDENT

                          through:            Mr. Bharat Beriwal, Advocate.

CORAM :-

       HON'BLE MR. JUSTICE A.K. SIKRI
       HON'BLE MR. JUSTICE M.L. MEHTA

       1.     Whether Reporters of Local newspapers may be allowed
              to see the Judgment?

       2.     To be referred to the Reporter or not?

       3.     Whether the Judgment should be reported in the Digest?


A.K. SIKRI, J. (ORAL)

1. The assessee is a Charitable Trust registered under the

Societies Registration Act XXI of 1860. It had filed the return

for the assessment year 1999-2000 declaring the income at nil,

which was accepted by the Assessing Officer under Section

143(1)(a) of the Income Tax Act. However, thereafter, the

assessment was re-opened by issuing a notice dated 30.3.2006

under Section 148 of the Act, on the basis of the information

received from the Director of Income Tax (Investigation) that

the assessee had received certain accommodation entries in its

account on 08.1.1999. After the re-opening of the case, the

Assessing Officer went through the records again and found

that the assessee had taken donations in the sum of

`53,52,900/- and unsecured loan of `1,14,58,500. The

Assessing Officer asked the assessee to give details in respect

thereof. A numbers of opportunities were provided by the

Assessing Officer for this purpose but the assessee failed to

avail the said opportunities and furnish the details thereof to

the following effect:-

(i) List of donors alongwith confirmations in respect of

donation received, giving complete address, PAN,

Ward No., mode of payment received with cheque

No., DD No., Pay Order No., date & address of the

bank.

(ii) Details of loans & liabilities alongwith confirmation of

`1 lac and above.

(iii) Details of relief made to poor with evidence.

(iv) A copy of the bank statement for the relevant period.

(v) Books of accounts and vouchers for the period, under

consideration.

2. In these circumstances, the Assessing Officer passed re-

assessment order treating the donations of `53,52,900/- and

unsecured loan of `1,14,58,500 as undisclosed income and

made the additions under Section 68 of the Income Tax Act.

3. The assessee filed an appeal there against before the CIT(A)

and produced some documents/evidence for the first time

before the CIT(A). On the evidence, the CIT(A) asked for

remand report. The Assessing Officer in his remand report

objected to the admission of the additional evidence on the

ground that the requirements of Rule 46A of the Income Tax

Rules were not satisfied as the assessee had failed to produce

the same before the Assessing Officer in spite of various

opportunities given and no reasons whatsoever were given by

the assessee as to why such evidence could not be produced

before the Assessing Officer, which the assessee is sought to

produce before the CIT(A). However, the documents which

were produced were not verified by the Assessing Officer and,

therefore, he did not furnish any comments thereupon. The

CIT(A) admitted the evidence and allowed the appeal of the

assessee on the basis of the said additional evidence holding

that on the basis of this evidence, the assessee was able to

point out the source of donations as well as loans and how the

said donations and loans were duly applied for the objective of

the assessee/society.

4. The ITAT has upheld this order of the CIT(A) by the impugned

order dated 06.8.2009.

5. Challenging that order, present appeal is preferred under

Section 260A of the Income Tax Act (hereinafter referred to as

'the Act'). The main plank of challenge is that there was no

reason to admit the additional evidence when the assessee

failed to produce the same in spite of number of opportunities

granted to the assessee. In the alternative, it was submitted

that since the AO had objected to the admission of the

additional evidence, even if the same is to be admitted,

opportunity should be granted to the AO to verify the same.

6. Learned counsel for the assessee, on the other hand, has

contested the appeal by relying upon the orders of the CIT(A)

as well as the Tribunal.

7. After hearing the counsel for the parties, we are of the opinion

that at this stage admission of the additional evidence admitted

by the CIT(A) be not interfered with. It is moreso when the

assessee is a Charitable organization. We may also record the

submission of the learned counsel for the respondent that

insofar as unsecured loans are concerned, they were paid back

in subsequent years, which shows that these were the genuine

loans taken by the assessee. At the same time, we find that

the CIT (A) after admitting the evidence relied upon the same

without any verification. No doubt, the remand report of the

AO was called for and it was found that the AO did not go into

to the veracity of the same and reproduced some facts from

the assessment order. It was because of the reasons that the

AO strongly felt that there was lapse on the part of the

assessee in not producing the evidence before him when he

had been given number of opportunities and therefore, he

objected to the admission of the said evidence and did not do

any further exercise to verify the same. At the same time, we

also find that even the CIT (A) did not go into these documents

and simply relied upon these documents and gave benefit to

the AO. Therefore, in order to balance the equities, we are of

the opinion that on one hand, the assessee be permitted to rely

upon the additional evidence produced before the CIT (A), at

the same time, the AO also be given opportunity to verify these

documents.

8. Accordingly, we remit the case back to the AO who shall go

into the veracity of these documents. The assessee shall also

be entitled to show that the unsecured loans had been repaid.

If the assessee is able to explain the donations as well as

unsecured loans properly, the AO shall accept the same.

9. This appeal stands disposed of in the aforesaid terms.

(A.K. SIKRI) JUDGE

(M.L. MEHTA) JUDGE MAY 18, 2011 ka/pmc